Framework: An Integrated Approach to Portfolio, Program and Project
|[AACE HOME] -- [TCM HOME] -- [BUY THE TCM FRAMEWORK] --[DOWNLOAD PDF VERSION]|
[TOC] [PREVIOUS] [NEXT]
III. PROJECT CONTROL PROCESS - CHAPTER 7 - PROJECT CONTROL PLANNING
7.5 Value Analysis and Engineering
Value analysis (VA) and value engineering (VE), when applied as processes, are "the systematic application of recognized techniques which identify the functions of the product or service, establish the worth of those functions, and provide the necessary functions to meet the required performance at the lowest overall cost." Typically, lowest overall cost refers to the lowest life-cycle cost. While VE is focused on the development of new assets, and VA on existing assets or projects, their representation in a basic process map is the same. This section refers to this process as VA/VE.
The objective of VA/VE is to improve the value for the intended asset or project objectives as defined by the respective strategic asset requirements (see Section 3.1) or project implementation basis (see Section 4.1) inputs. However, unlike other practices used to improve "value" (e.g., suggestion lists, cost reduction exercises, etc.), VA/VE is based on rigorous function definition and alternative analysis. The outputs of VA/VE are asset and project scope alternatives with improved value, which must be decided upon by the strategic or project leadership.
7.5.2 Process Map for Value Analysis and Engineering
In TCM, the VA/VE process includes six basic steps: (1) planning and initiation, (2) function analysis, (3) creativity, (4) idea evaluation, (5) idea development and documentation, and (6) methods and tools development. The value engineering process centers on steps that analyze functions and then assess their relative value. The outputs of value engineering are used primarily as inputs for the project implementation process. Figure 7.5-1 illustrates the process map for VA/VE, but keep in mind that the process is typically applied in a phased manner (i.e., more than once during a project) consistent with the project scope development phases described in Section 7.1
Figure 7.5-1 Process Map for Value Analysis and Engineering
The following sections briefly describe the steps in the value analysis and engineering process.
.1 Plan and Initiate the VA/VE Study
At the start of the process, VA/VE study leadership is established with the responsibility to plan and prepare for the main effort of the VA/VE study that will begin with function analysis. Preparation typically entails the following activities: (a) defining the subject asset or project including customer requirements for it and attitudes about it, (b) gathering information about and building models of the asset or project that will support the study, (c) establishing criteria for the study, (d) documenting the study scope, and (e) establishing a value study team.
Basic inputs to value study planning and initiation include the documented strategic asset requirements and project implementation basis (see Sections 3.1 and 4.1, respectively), and the current asset or project scope definition (see Sections 3.2 and 7.1). Additional technical and programmatic information and deliverables that define asset or project attributes are also inputs.
This basis scope information should be further evaluated to define the specific asset or project component to be studied, as well as the basic asset or project function that allows the customer to accomplish his task (i.e., why the asset exists or is needed). Furthermore, customer requirements for (i.e., wants and needs) and attitudes about the asset or project must be defined. Study leadership may use focus groups and/or surveys to determine the following:
a. The prime buying or investing influence (i.e., who the customer really is);
b. The importance of features and characteristics of the asset or project;
c. The seriousness of user-perceived faults and complaints of the asset or project;
d. How the asset or project compares to competing or similar assets or projects.
Much of this information gathering effort is focused on discovering the motivation for the customer to invest (despite faults) in this asset or project above all other alternatives. This information becomes the basis of the study teams value proposition to the user and the value delivery system to get it to them.
The VA/VE study will also require technical and programmatic information that defines the physical attributes and performance characteristics of the asset or project (and any comparables that might be considered) such as drawings, specifications, test reports, and so on. The study leadership should gather the information needed for the study or at least make sure the information can be readily obtained or accessed when needed. Site visits, inspections, or walk-throughs can provide understanding that hard documents cannot convey. The study leadership may also obtain or build models of cost, energy use, and other attributes as might be appropriate for the study.
The study leadership also must establish the general criteria and measures that will be used to rate, rank, or decide upon value improvement ideas during the performance of the study. Finally, the VA/VE leadership must determine the appropriate study team members who will participate in or support the planned study activities, as well as lining up other resources required (e.g., meeting space, etc.).
The output of the planning and initiation step is documentation of the scope of the VA/VE study, as reviewed and agreed to by the study team and strategic or project leadership as appropriate. The scope describes the basis of the study (e.g., objective, methods, measures, assumptions, etc.) and defines what is or is not included in the study and what the team is or is not able to control or change.
Planning for VA/VE studies is facilitated when the enterprise has a project system that establishes guidelines for when and how VA/VE is to be applied and provides study support capabilities (i.e., methods, tools, and resources). VA/VE studies are typically applied in a phased manner consistent with the project scope development phases described in Section 8.1. The VA/VE process may be applied at any phase, but is most often applied at the initial phases of asset or project planning when scope definition is evolving and changes are least disruptive.
Many individuals in the strategic asset or project team may be involved in performing the VA/VE process. The value study team should be multidisciplinary. Management support of the process is vital to ensure that all the necessary resources are made available and are committed to the success of the process. Success is also facilitated by having an experienced cost or value specialist coordinate the effort.
.2 Perform Function Analysis
In this study stage, the study team uses function analysis to document the functions of the asset and/or its project components. The analysis is based on the study scope and defining deliverables described in the previous section. The primary method to analyze function is to model it using function hierarchy or function analysis systems technique (FAST). FAST is a diagramming technique to graphically show the logical relationships of the functions of a product in a hierarchical order (it is not a function flow diagram based on time sequence). The techniques value lies in the intensive questioning, challenging, and analysis of functionality that takes place during the diagram development. One aspect to challenge is the validity of constraints that dictated the original design, material, components, or procedures (i.e., constraints analysis).
Next, the study team quantifies function importance and cost metrics using value measurement techniques. These techniques provide quantitative measurements that indicate the relative strength of a respondents perception of the item(s) or attributes of items. Value measurement techniques include rating, scaling, constant sum, pair comparison, criteria analysis, scoring model, ranking, and others. A "values index" is a common metric that is the ratio of the functions monetary worth to the functions cost.
The output of the function analysis stage is an ordered list of functions or items arrayed from the highest to lowest relative measured value as they currently exist.
.3 Apply Creativity
In this stage, the study team applies creative techniques to generate a list of alternative ways to replace, improve, or eliminate the low value functions or items identified in function analysis. This is a creative step that should be as unconstrained by habit and past thinking patterns as possible (i.e., "think outside the box"). Judgment of the quality of ideas is set aside at this stage. The objective of creativity is not to find ideas for asset design, but to find ideas for how to perform the functions, including unique combinations of functions.
.4 Evaluate Ideas
In this stage, the study team synthesizes ideas and selects the most feasible for final development and documentation. Value screening techniques are used to reduce the list of ideas to a manageable size. Screening techniques are usually qualitatively oriented, but they may quantify the attributes of items where numbers and scales indicate some measure of importance.
If none of the final ideas and combinations satisfactorily meet the study criteria, or if an apparently low value idea is considered a possible candidate for further improvement, the study team returns to the creativity stage. At the end of the evaluation stage, a ranked list of satisfactory alternatives is developed.
.5 Develop and Document Alternatives
Beginning with the highest rank value alternatives, the study team employs asset and project planning process methods (as covered in the sections of Chapters 3 and 7) to develop the scope of the alternative ideas and assess their impact on asset or project performance (e.g., cost, schedule, quality, risk, etc.). Based on the study teams understanding of the asset requirements and project objectives, the team identifies the best alternative(s) (if any) and document its basis. Typically, the study team prepares a study report that describes the performance of the study, its basis, and the teams recommendations. Project leadership then reviews the report and decides whether to implement the recommendations (see Section 4.1). If the project is in the later planning or execution phases, the recommendation may be handled through the change management process (see Section 10.3).
The value study report, and lessons learned about the study process, are captured in the project system historical database (see Sections 6.3 and 10.4). The value study team leadership may further track and assess the performance of the actions resulting from the value study. While it is difficult to parse the effects from any particular study, industry benchmarking has shown that there is a statistical correlation between the use of value improving practices and improved project cost outcomes.
7.5.3 Inputs to Value Analysis and Engineering
.1 Strategic Asset Requirements and Project Implementation Basis. (see Sections 3.1 and 4.1). These define the basis asset scope, objectives, constraints, and assumptions.
.2 Asset or Project Scope. (see Sections 3.2 and 7.1). Deliverables (asset options, work breakdown structure, work packages, and execution strategy) that define the current asset or project scope. Scope changes (see Section 10.3) for which VA/VE will be applied also channel through the scope development process.
.3 Asset or Project Technical Information. Deliverables that define the physical and performance attributes of the asset or projects to be studied.
.4 Customer Requirements. These requirements are the wants and needs of the user or other stakeholders. VA/VE must discover the motivation for the customer to invest (despite faults) in this asset above all other alternatives.
.5 Planning Information. (see Sections 3.2, 3.3, 7.2, 7.3, 7.4, 7.6, and 7.7). While VA/VE value measurements are focused on cost, outputs from other planning processessuch as schedule planning and development, risk management, and quality function deploymentare considered in evaluating candidate alternatives. Specialists for applicable processes (e.g., estimating, scheduling, etc.) may be part of the value study team.
.6 Cost Information. (see Sections 5.1, 9.1, and 7.3). Value measurement is focused on relative cost and value measures. The cost information comes from cost estimating or accounting measurements.
.7 Historical Information. (see Sections 6.3 and 10.4). Past study approaches and results may help the plan the VA/VE study.
7.5.4 Outputs from Value Analysis and Engineering
.1 Cost Information. The VA/VE function analysis and evaluation steps apply the cost estimating methods covered in Section 7.3.
.2 Planning Information. (see Sections 7.2, 7.3, 7.4, 7.6, and 7.7). The VA/VE evaluation step applies the methods of the project planning processes.
.3 Value Study Report. (see Sections 4.1 and 7.1). Describes the performance of the study, its basis, and recommendations for implementation. The recommendations may be implemented at the asset management or project level as appropriate.
.4 Historical Information. (see Sections 6.3 and 10.4). The study approach and results are captured for use in future methods and tools development and VA/VE study planning.
7.5.5 Key Concepts and Terminology for Value Analysis and Engineering
The following concepts and terminology described in this and other chapters are particularly important to understanding the VA/VE process of TCM:
.1 Value. (See Section 7.5.1).
.2 Functions. (See Section 7.5.1).
.3 Customer Requirements. (See Sections 7.5.1 and 3.1).
.4 Function Analysis. A type of function model (See Section 184.108.40.206).
.5 Value Measurement. (See Section 220.127.116.11).
.6 Value Screening. (See Section 18.104.22.168).
Further Readings and Sources
Portions of this section are excerpted from Chapter 24 ("Value Analysis" by Del L. Younker) of the Skills and Knowledge of Cost Engineering referenced below. Also, as previously mentioned, this process is conceptually consistent with SAVE Internationals "Value Methodology Standard" (www.value-eng.org, 2003). SAVE International is the primary technical association for this technology. However, there are many references describing value analysis, engineering, management, and methodology for various asset and project types in various industries. The following provide basic information and will lead to more detailed treatments:
Akiyama, K. Function Analysis. Cambridge, MA: Productivity Press, Inc., 1991.
Dell'Isola, Alphonse. Value Engineering: Practical Applications. Kingston, MA: R.S. Means, 1998.
Fowler, T. C. Value Analysis in Design. New York: Van Nostrand Reinhold, 1990.
Lawrence D. Miles Value Foundation (www.valuefoundation.org)
Miles, L. D. Techniques of Value Analysis and Engineering. New York: McGraw Hill, 1961.
Mudge, A. E. Value Engineering: A Systematic Approach. New York: McGraw Hill, 1971.
Parker, Donald E. Value Engineering Theory. Washington, DC: The Lawrence D. Miles Value Foundation, 1995.
Shillito, M. L., and D. J. DeMarle. Value: Its Measurement Design and Management. New York: John Wiley & Sons, Inc., 1992.
Younker, Del L. Value Engineering: Analysis and Methodology. New York: Marcel Dekker, Inc., 2003.
[TOC] [PREVIOUS] [NEXT]
2008 By AACE® International www.aacei.org